When government bureaucrats tamper with the laws of supply and demand, the results are usually predictable and often unpleasant.
Such is the case with Philadelphia’s recently enacted tax on sodas. Though only in effect for a short period of time, the city’s tax has already reduced consumption and that is leading to pay cuts and job losses for workers.
Last year, Philadelphia became the nation’s first major city to pass a tax on sugar-sweetened and diet beverages—1.5 cents per ounce.
While that may not sound like a lot, it equates to a $1.08 price increase per six pack of 12 ounce sodas which, depending on the particular drink, could mean anywhere from a ten percent to 40 percent increase on the price paid at the register.
For many consumers who don’t have a lot of extra income, the price increase means either buying less soda, going outside of the city to buy soda, or going without it entirely.
Now, only two months into the new tax, Philadelphia supermarkets and distributors are reporting “a 30 percent to 50 percent drop in beverage sales.” according to the Inquirer.
The 30-50 percent drop in Philadelphia’s soda consumption is substantially higher than what was considered a “whopping” 20 percent drop that was experienced when the smaller city of Berkeley, CA enacted such a tax.
Obviously, without sales, companies must reduce costs and one of the biggest costs to beverage companies is their payroll.
As a result of the reduction in beverage sales, workers are getting laid off.
One of the city’s largest distributors says it will cut 20 percent of its workforce in March, and an owner of six ShopRite stores in Philadelphia says he expects to shed 300 workers this spring.
“People are seeing sales decline larger than anything they’ve seen up to this point in the city,” said Alex Baloga, vice president of external relations at the Pennsylvania Food Merchants Association.
For the account representatives and sales personnel for the soda companies, they have seen their “take home pay cut in half and some by as much as 70 percent because they’re moving so much less product,” according to Danny Grace, secretary-treasurers for Teamsters Local 830.
Despite the tax being sold to the public as a means to funding early childhood education, a significant portion of the money will be used for other programs and “employee benefits.”
Although the Philadelphia mayor and his supporters were warned that such a tax would kill jobs, the warnings were ignored.
For his part, Philadelphia Mayor Jim Kenney—a Democrat—is blaming the businesses, claiming they are “price gouging” their customers.
Unfortunately, despite the negative consequences of the soda tax on workers, voters in four more cities approved soda-tax measures in November.